Bonds Take a Breather!
After a nearly 2-month rally, Bond futures are taking a breather after last week’s volatile trade. This morning, September Bonds are trading slightly in the red, as traders gear up for the release of the July Producer Price index. The consensus estimate is for a rise of 0.1% in the headline number, with the so-called “core” index – which excludes food and energy costs – rising by 0.2% versus a 0.3% rise in June. Traders’ expectations have been lowered for this morning’s report due to weaker equity markets, as well as a lower-than-expected rise in U.K. consumer prices. Flight-to-quality buying of Bond futures has been limited by the actions of central banks throughout the world, which have been adding liquidity to market to help stem a short-term liquidity crunch. Chart watchers will notice that the 20-day moving average is poised to cross above the 110-day moving average, which if confirmed could spark additional buying by technical traders.
Looking at the chart for the September Bond contract, we notice a potential symmetrical triangle pattern forming. Normally this pattern signals a rest period in the continuation of the current trend – combined with the potential moving average crossover, this should peak the interest of technical traders in the near-term. The 14-day RSI has moved into neutral territory with a current reading of 50.99. 109-27 is seen as near-term resistance for the September Bond, with support found at the recent lows of 108-20. In early trade, September Treasury Bond futures are trading at 109-13, down 0-02.
